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2015 (5) TMI 125 - HC - Income TaxDisallowance of loss on account of alleged share transactions - shares of certain companies purchased and further the loss claimed on account of diminution in value of those shares - whether ITAT accepting the genuineness of the loss as declared in respect of shares purchased and sold or held as stock-in-trade is perverse? - Held that:- The Tribunal proceeded on an erroneous footing that all shares have been “bought through the recognised stock exchange through the main broker of the exchange”. There was no evidence to indicate that all shares were bought through the stock exchange. The assessee also did not claim this; the assessee had claimed before the AO that all shares were “bought from the broker of Gauhati Stock Exchange” None of the material produced by the assessee could be relied upon to indicate the market value of the shares. The certificates issued by the Gauhati Stock exchange for the previous years 1997-98 and 1998-99 certified the “traded prices of the shares.. as intimated by a member as off the floor transactions”. This, clearly, indicated that: (a) the transactions were not conducted through the stock exchange but merely reported as off market transactions; and (b) the transaction was reported by a singular member - thus, the transaction did not involve any other broker. Further the dates and quotations certified, clearly pertained to the transactions involving the assessee and or related companies as parties. The dates of the memos of confirmation and the date of transaction reported to the stock exchange are the same in almost all instances. Thus, these certificates, which only certify the prices at which transactions in question were reported cannot prove that the transactions were executed at market value. Since these transactions in question were not done in open market, but between related concerns and no other transactions in those shares were reported, any price at which the assessee transacted would, obviously, be reflected as a quotation by the Gauhati Stock Exchange. The AO had found that the assessee and the companies whose shares purchased were related. It was pointed out that those companies were promoted by Mr Modi who had disclosed that he had used his undisclosed funds to promote those companies. The assessee had argued that the fact that undisclosed funds were used in promoting companies did not mean that the companies did not carry on its business or were not genuine. However, it was apparent that Mr Modi was the prime mover of the companies in question. The assessee had booked losses in respect of shares of certain companies. The close link between the said companies and the assessee was clearly established. In our view, the link established between the assessee and these companies was important in considering the question whether the transactions of shares were genuine or not.the Tribunal grossly erred in completely ignoring the aspect of inter linked entities and overlooking the perspective outlined by the AO. Insofar as the loss in relation to shares of Mather & Platt India Ltd. is concerned, there is no allegation that the assessee is related in any manner to the said company. In this view, the losses as claimed by the assessee in respect of Mather & Platt India Ltd. cannot be rejected. The losses claimed by the assessee, except the losses relating to the shares of Mather and Platt India Ltd. i.e. ₹ 56,650/- in the assessment year 1997-98, ₹ 1,12,500 in the assessment year 1998-99; and ₹ 67,500/- in the assessment year 1999-00, are liable to be disallowed. - Decided in favour of the Revenue.
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